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David Becker
Comex Gold
Comex Gold

Gold prices reversed course forming an outside reversal day, which points to a short-term rejection of higher prices. Prices attempted  to break out but seller came in pushing the yellow metal lower.  A weaker than expected EU PMI report for September reversed the upward momentum in the Euro and allowed the dollar to gain traction. With Italy again in the crosshairs, the volatility of peripheral yields moved out versus the bund which also benefited the dollar. A stronger dollar is generally bad for gold prices as the are quoted in US currency and a stronger dollar means gold need to stay lower

Technical

Gold prices attempted to test resistance but failed near the 50-day moving average at 1,206. Prices were rejected and formed an outside reversal day which is a higher high a lower low and a lower close during an uptrend. This is an ominous sign and could allow prices to head back to support near the September lows at 1,187. Prices slipped through the 20-day moving average which is short term support near 1,200. Volatility remains subdued as the Bollinger band width, the difference between the Bollinger high and the Bollinger low, prints at the lowest level seen since June of 2018. Positive momentum is decelerating as the MACD (moving average convergence divergence) histogram prints in the black with a declining trajectory which points to consolidation.

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European Flash PMI Reading Where Softer than Expected

The European Union reported on an unexpected weakness in its initially composite PMI readings. Manufacturing was softer than expected and despite an uptick in services, the composites declined.

The composite PMI composite drop to 54.2 from 54.5 in August which is the lowest the composite reading has been since May. The Manufacturing flash PMI declined by 53.3 from 54.6 and which was offset by a rise in the services PMI which increased to 54.7 from 54.4.  Expectations were for the headline to increase to 54.6.

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